Avolon posts steady profits and lease revenues in 2019

By Verdict Staff March 13, 2020

Avolon, one of the world’s largest aircraft leasing companies, reported a slight increase in net profits in 2019, against a year of turbulence for an aviation sector not yet infected with the coronavirus.

Last year’s challenges included managing Europe’s enduring economic slowdown, the trade war between Washington and Beijing, geopolitical tensions, uncertainty over Brexit and the worldwide grounding of Boeing’s 737 Max aircraft all played a part to create a difficult business environment for airlines.

Despite this, the Ireland-based company posted $718m (€656m; £558m) in net profits last year while lease revenue increased by 2% year-on-year to over $2.6bn (€2.4m; £2bn).

Avolon also delivered, transitioned or sold a total of 170 aircraft during 2019. It said 98.9% of its 925 aircraft were in use during the year, with the average fleet age of its planes coming in at five years with an average remaining lease term of seven years.

Dómhnal Slattery, chief executive of Avolon, said: “2019 was another year of strong financial performance for our business, where we achieved a major corporate milestone with our upgrade to investment grade.

“We built on this achievement by delivering net profit of $718m, the highest net income in any year in Avolon’s history.

“Looking ahead, the continued spread of the coronavirus creates an uncertain backdrop for our airline customers.

“However, in previous periods of dislocation, air traffic has proven to be resilient. We have multi-cycle experience, a proven management team and a strong investment-grade balance sheet. It is in an environment of uncertainty where this experience matters most.”

Avolon’s is 70% owned by an indirect subsidiary of Bohai Leasing Co Ltd, a public company listed on the Shenzhen Stock Exchange and 30% owned by ORIX Aviation Systems, a subsidiary of ORIX Corporation which is listed on the Tokyo and New York Stock Exchanges.

IATA’s review of 2019

In February, the International Air Transport Association (IATA) announced full-year global passenger traffic results for 2019 showing that demand (revenue passenger kilometres or RPKs) rose by 4.2% compared to the full year of 2018.

The 2019 result is a slowdown compared to 2018’s annual growth of 7.3% and marked the first year since the global financial crisis in 2009 with passenger demand below the long-term trend of around 5.5% annual growth, the group said in a statement.

Full-year 2019 capacity climbed 3.4%, and the load factor rose 0.7 percentage point to a record high of 82.6%. The previous high was 81.9% set in 2018, IATA said.

Alexandre de Juniac, the director-general and chief executive of IATA, said: “Airlines did well to maintain steady growth last year in the face of a number of challenges. A softer economic backdrop, weak global trade activity, and political and geopolitical tensions took their toll on demand.

“Astute capacity management, and the effects of the 737 Max grounding, contributed to another record load factor, helping the industry to manage through weaker demand and improving environmental performance,” he said.